The Census Bureau said that new factory orders fell 3.4 percent in December, extending the 1.7 percent decrease observed in November. It was the fifth straight monthly decline. This disappointing report was foreshadowed by the preliminary durable goods release, which stated that sales had declined in four of the past five months. As such, these data show that manufacturing activity ended 2014 on a weak note, with sluggish global growth dampening demand in the United States. To illustrate the slowness of recent data, manufactured goods orders averaged $498.81 billion per month in 2014 as a whole, but December’s level was just $471.45 billion. On a more encouraging note, the average for new factory orders in 2014 was 2.8 percent higher than the $485.4 billion monthly average seen in 2013. (continue reading…)

Despite these solid figures, output measures for the sector have been more volatile, up just 1.6 percent in the soft first quarter and then rebounding with a 7.1 percent increase in the second quarter. In these latest third quarter numbers, manufacturing output rose a solid 4.1 percent, helping to push unit labor costs down 0.7 percent. Lower unit labor costs help to make the sector more competitive globally. Indeed, unit labor costs for the manufacturing sector have fallen 5.4 percent since the end of the Great Recession, with even steeper declines in the manufacturing sector. (continue reading…)

Excluding transportation, new factory orders declined 0.8 percent, suggesting softness in the broader market. Durable goods orders excluding transportation fell 0.7 percent, with nondurable goods sales off 0.9 percent. Despite the decline in July, demand has largely been higher since January’s winter-related decreases, and new manufacturing orders excluding transportation have risen 2.7 percent over the past six months. As such, hopefully, the July numbers are just a pause in an otherwise positive trend year-to-date.

Looking specifically at new durable goods orders in July, the data were mostly lower. This included electrical equipment and appliances (down 4.8 percent), computers and electronic products (down 1.7 percent), furniture and related products (down 1.2 percent), machinery (down 1.2 percent) and primary metals (down 0.3 percent). Outside of transportation, the only other major sector with higher sales in July was fabricated metal products, up 0.1 percent.

Manufacturing production increased 0.1 percent in June, its slowest pace since January’s weather-induced decline. In general, manufacturers continue to expand upon the softness earlier in the year, with year-over-year growth of 3.5 percent in June, up from 1.5 percent in January. However, the year-over-year rate was slightly lower than the 3.7 percent pace experienced the month before. Similar trends were seen with manufacturing capacity utilization, which declined from 77.2 percent in May to 77.1 percent in June. While lower for the month, it still represented progress from the 75.5 percent rate seen in January.

On a year-over-year basis, durable goods production has risen by a healthy 5.5 percent in June, an increase from 5.4 percent observed in May. Nondurable goods activity was up a less robust 1.5 percent over the past 12 months, down from 2.1 percent the month before. The largest gains in production over the past year were seen in the following sectors: plastics and rubber products (up 7.5 percent), motor vehicles and parts (up 6.8 percent), fabricated metal products (up 6.2 percent), machinery (up 6.1 percent), furniture and related products (up 5.9 percent), primary metals (up 5.9 percent) and nonmetallic mineral products (up 5.8 percent).

Meanwhile, overall industrial production rose 0.2 percent in June, slower than the 0.5 percent increase in May. On a year-over-year basis, industrial production has grown 4.3 percent. Mining accounted for the largest jump in output, up 0.8 percent for the month and 9.7 percent year-over-year. Utility output declined for the fifth straight month, down 0.3 percent in June but up 1.8 percent year-over-year. Total capacity utilization was unchanged at 79.1 percent.

In conclusion, manufacturers continued to expand output, with the sector recovering from softness earlier in the year. Yet, growth slowed in June, and we would like to see improvements coming from a broader base of the manufacturing sector. In general, manufacturers are cautiously upbeat about production in the second half of this year, but for those projections to materialize, we need to see stronger growth in the U.S. and globally. For that reason, policymakers should focus on those initiatives which will keep the economy growing moving forward.

Chad Moutray is the chief economist, National Association of Manufacturers.

Capacity utilization also eased a bit in the manufacturing sector, down from 76.9 percent in March to 76.4 percent. This brought the utilization rate back to where it was in December. On a year-over-year basis, manufacturing capacity has grown 2.1 percent.

The underlying data by sector were mixed but lower, with 12 of the 19 major sectors experiencing reduced output for the month. Durable goods and nondurable good production both declined, down 0.3 percent and 0.4 percent, respectively. The largest monthly declines were seen in the machinery (down 1.6 percent), petroleum and coal products (down 1.6 percent), primary metals (down 1.6 percent), furniture and related products (down 1.2 percent), and plastics and rubber products (down 1.0 percent) sectors.

Meanwhile, overall industrial production declined 0.6 percent in April, following 0.9 percent and 1.1 percent gains in February and March. Mining activity (up 1.4 percent) increased for the second straight month, but this was offset by declines in manufacturing (see above) and utilities (down 5.3 percent). Industrial production rose 3.5 percent between April 2013 and April 2014, reflecting modest gains, but this was down from a 3.9 percent pace the month before. Capacity utilization was lower, as well, down from 79.3 percent to 78.6 percent.

In conclusion, the U.S. economy has started 2014 at a much slower pace than anticipated, particularly given the strong momentum seen at the end of 2013. While manufacturers have begun to rebound from winter-related softness earlier in the year, it remains clear that output growth has not fully recovered to the pace seen just a few months ago.

We remain hopeful for the demand and production to accelerate in the coming months, but April’s decline in activity shows just how fragile our recovery has been. Manufacturers are cautiously optimistic about increased activity this year, but there is also nervousness that such progress will be fleeting, much as it has in previous years. We can’t afford to continue the “one step forward, two steps back” trend – it is costing us the ability to truly compete in the global economy – policymakers must combat that trend with pro-growth measures that allow manufacturers to make sustained investments and grow their businesses.

Chad Moutray is the chief economist, National Association of Manufacturers.

The Bureau of Labor Statistics said that labor productivity in the manufacturing sector improved in the first quarter. Manufacturing labor productivity rose 3.3 percent in the first quarter, up from 1.3 percent in the fourth quarter and higher than the 2.3 percent average for 2013. Yet, the negative impact of weather can also be seen in this data, with the pace of manufacturing output growth declining from 4.7 percent to 1.8 percent. The fact that total hours decreased 1.4 percent in the first quarter was even more telling of this. As a result of weaker activity, unit labor costs eked out a 0.1 percent increase.

Breaking this data down by sector, labor productivity for durable goods manufacturers outpaced their nondurable goods peers, up 3.6 percent versus 2.5 percent, respectively. The larger impact of weather was seen in the durable goods industry, with hours falling 1.9 percent in the first quarter and output growth decelerating from 6.9 percent in the fourth quarter to 1.6 percent in the first quarter. Nondurable goods output rose 2.0 percent. Still, unit labor costs were slightly lower for durable goods businesses (down 0.1 percent), with nondurable goods unit labor costs up 0.4 percent.

Looking at longer-term trends, we continue to see one of the reasons why manufacturing in the U.S. has become more attractive in recent years. Since the end of 2009, unit labor costs for manufacturers have fallen 3.3 percent, with durable goods unit labor costs off 12.1 percent over that time frame. These figures help to keep U.S. manufacturers more competitive globally.

In the larger economy, nonfarm labor productivity declined 1.7 percent in the first quarter, following three consecutive quarters of decent growth. Output rose a paltry 0.3 percent, down from the much stronger growth rate of 3.8 percent in the fourth quarter. Therefore, unit labor costs were up 4.2 percent for the quarter. In 2013, nonfarm labor productivity rose 0.5 percent, with output up 2.2 percent and unit labor costs up 1.1 percent.

Chad Moutray is the chief economist, National Association of Manufacturers.

Meanwhile, manufactured goods shipments were up 0.3 percent in March, a bit slower than the 0.9 percent rebounded pace of February. Still, it was the second straight monthly gain in shipments, which was notable. Similar to the new orders figures, however, shipments were lifted by strength in durable goods (up 1.2 percent), with nondurable goods shipments off 0.6 percent.